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Supreme Court Refuses to Hear Case on Making Online Retailers collect Sales Tax

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All but five states impose sales taxes on purchases, whether online or not, and an increasing number have passed legislation to force online retailers such as and eBay to begin collecting those taxes from customers.

The court’s decision to stay out of the issue for now may put more pressure on Congress to come up with a national solution, as both online and traditional retailers complain about a patchwork of state laws and conflicting lower-court decisions.

“The failure of the court to take and decide this case will create an additional burden on interstate commerce since the line between a physical and virtual presence will only continue to blur,” said David C. Blum, a Chicago tax lawyer who represents online retailers and traditional businesses. “We can only hope that the court will take other similar cases in the near future” to settle the issue.

Customers in states with sales taxes are supposed to remit the tax on purchases they make from online retailers. But few do. The National Conference of State Legislatures estimated in 2012 that states lost $23 billion in uncollected taxes of all types and that about half were from online sales.

As is its custom, the court gave no explanation for turning down petitions from Amazon and Overstock to review a decision by New York’s highest court to uphold that state’s 2008 law requiring sales tax collections.

Seattle-based Amazon has no offices, distribution centers or workforce in New York. But the New York Court of Appeals said the company’s relationship with third-party affiliates in the state that receive commissions for sending Web traffic its way satisfied the “substantial nexus” necessary to force the company to collect taxes. (Amazon founder Jeffrey P. Bezos also owns The Washington Post.)

Overstock Executive Vice President Jonathan Johnson said that he was disappointed by the court’s action and that his company thinks it has “no obligation to be the tax collector for the state of New York.” Overstock suspended its relationship with affiliates in the state that would have made it subject to the New York law.

State Attorney General Eric T. Schneiderman (D) had urged the court to stay out of the fight while elected officials continue to address it.

“Today’s Supreme Court decision validates New York’s efforts to treat both online and brick-and-mortar retailers equally and fairly, by requiring all retailers with a presence in our state to collect sales taxes,” he said in a statement.

SOURCE: The Washington Post

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